Blessed by the Potato

Ok geeks, here’s an accounting debate for you: how should cash be reported on the balance sheet?

At first it seems like a nonsense question. Of all the things you have to adjust for and debate how to report on the balance sheet, cash is the one sure thing: it’s carried at exactly what it’s worth, with no concern over depreciation or market value. Yet once again today I heard a familiar refrain: “Oh, they’re sitting on a tonne of cash. But it’s all overseas, so they can’t bring it back to pay a dividend without paying tax on it.” Well, if it can’t be used without tax being paid on it, then is it really honest to report it at full value on the balance sheet? Shouldn’t there be a corresponding liability for tax payable but not yet incurred to reflect the fact that — should it be needed — the cash isn’t really there? Yet right after saying that, I heard another familiar phrase “so if you back out the cash, it’s only trading at 10 times earnings.”

Well, which way is it to be: is the cash money good that you should “back out” of the valuations, or is it stranded overseas, and only worth some fraction of what it’s reported as on the balance sheet?

Should GAAP/IFRS reporting specify where cash is, or apply some discounting mechanism to reflect the fact that it is not truly available to shareholders at the indicated levels?

The election is coming up soon in Ontario, and I still haven’t made my mind up about who to vote for.

I’m mixed on the Liberals and Dalton McGuinty. Though he has some good ideas over the years, the execution has been terrible. Coming out of the horrible Harris years, Dalton came to power on the promise that he’d fix the PC’s mess without raising taxes. That lasted what, a month? Ok, so he had to raise taxes (and unlike Harper/Flaherty, did seem to put forward a case for that being justified). Except instead of just owning up to it and raising income taxes or sales taxes, or even doing something truly innovative like bringing in a carbon tax, the Liberals brought in the Ontario Health Premium: a regressive tax that is very visible: what is it, 9 years later and that one still sticks in people’s craws; a less visible hike in the existing income taxes would have been both more progressive and may even have been forgotten by now. And no one was fooled into thinking that he kept his no tax increases promise.

Bringing in electronic medical records is a brilliant idea hailed by many in the medical and research communities, and solutions are being sought to digitize medical records all over the world. The execution became one of the province’s biggest scandals (e-health). Something called academic detailing is another neat idea: taking the tricks of the pharmaceutical sales trade and applying them to improve health outcomes, promote evidence-based care, and control costs. It involves sending educators out to provide short on-site visits with physicians, giving them information on proper prescribing practices and evidence-based medicine updates. Yet I don’t think it ever got very far — that document I linked is from 2009, and at the end of that year a new health minister came in and I haven’t heard anything about it since.

Oh, and don’t get me started on the Guidelines Advisory Committee. There we had a case of a small organization building up in the early years, in this case building human capital with specialized knowledge, tools, and training in its small staff, only to have that thrown away for apparently no reason (the GAC was well-regarded both in Ontario and internationally, and was cheap). Provincial funding was cut in 2008 and the GAC was enveloped by an independent non-profit organization. Then the Excellent Care for All Act was passed in 2010, and all of a sudden there was a legislated need for someone to do exactly what the GAC had been doing just a two years before. Yet rather than resurrect the GAC (which still existed within that non-profit, maintaining the expertise and human capital), the government started from scratch, giving the mandate to the Ontario Health Quality Council (now renamed Health Quality Ontario).

Promoting green energy is a good idea, but the solar FIT program has been unsuccessful because administration issues are preventing projects from getting approval, and the rate offered may have been too lucrative. The smart meter program should not have been introduced at the same time as a general hike in electricity rates, as now people associate the TOU pricing with the higher prices. Dalton made a commitment to reduce coal emissions, but has dragged his feet on getting a new nuclear plant constructed to replace the coal generation (the plant should have been an excellent infrastructure project to get the economy going in 2009, and instead it hasn’t even been decided on yet!).

Another example is the court system (this one also includes Harris): the administration systems around our courts are ludicrous. So there was a push to computerize some of the bookings. A privatized system seems to have worked, but rather than expand that one to the rest of the court system, the government is starting a new “e-court” program from scratch.

Lots of good ideas and good intentions, but the outcomes have left much to be desired. So I’m left feeling disappointed in the provincial Liberals, but disappointment from my government is nothing new. Still, that’s worlds better than how I remember the Harris years (insanity from the top, privatizing anything and everything, and deterioration in health care and education while strikes were constant). And the new crop of PCs leave little to consider as alternatives.

I encourage you to watch Jon Stewart’s interview with former Michigan Gov. Jennifer Granholm

JS “The big idea floating around right now is that we must do everything we can for corporations…”

JG “Everything that’s happening to this country happened in Michigan first, because we never came out of the 2001/2002 recession. Everybody now is scratching their heads ‘how do you create jobs in this global economy?’ It’s not by the solutions that are being proposed by many, just cut taxes and cut government. Just as an example from the laboratory that is Michigan, I cut taxes 99 times in my two terms as governor… cut a lot of taxes, cut government more than any state in the nation, cut employees, cut spending. We were 48th in the country in terms of size of government by the time I left office. And you would think that with all those tax cuts, all that government reduction that we would be #1 in employment, right? If that were the solution. But, alas, we were #1 in unemployment for many years in the past decade. Why? Something else was going on. […] Those old theories were not applicable…”

JS “That’s what I was trying to say yesterday […] you could offer 0% tax rate to corporations, like Apple, but that still doesn’t mean they’re going to make their iphones, the parts, anyplace but China… don’t you think these corporations begin to look at us like a desperate suitor? […] What are we supposed to do?”

JG “…No state has the ability to compete against China […] the only thing that worked in Michigan, and the reason why in 2010 things started to turn around […] because the Obama administration gave us the opportunity to partner with the private sector to compete with federal grants and [targeted] state incentives and partner with universities […] it was only through that investment that we were able to go.”

In short, tax cuts do not work to stimulate the economy. Tax cuts do not work to create jobs. It’s been demonstrated again and again. So it’s with great dismay that I see one of the three main parties in this Ontario election put out their “jobs plan” and the central pillar is: tax cuts. Never mind that this was already a party with ridiculous notions (e.g.: the gutting of public education alongside the promise of money for religious schools; tax cuts alongside huge spending promises in their latest platform, yet while also promising to somehow balance the budget).

The NDP may be a good alternative in terms of policy (I honestly haven’t read their platform in detail yet), but they just don’t seem to have a chance in this race. While I’ve been critical of the Liberals at the beginning here, I think I will vote for them again. The problem is that their ideas are still the most closely aligned with mine, and I don’t see a strong alternative — though I am disappointed, they are still the best option before me. And, to be fair, I haven’t given them credit for the things they have managed to do right (sometimes in just one try!).

Sometime this week I’ll go through the NDP platform, but at this point I think I know which way I lean.

As soon as I heard that the mortgage brokers behind ratesupermarket were pushing a first time house buyer’s guide, I thought “I’m gonna hate that. Tearing it apart should make for a fun blog post.”

A novel idea was that you’d sign up for a 2-week guide that would send you one part of the lesson by email each day. Kind of gimmicky, why spread out 14 already-short pages over a full two weeks? Anyway, it’s short, there are cartoony graphics, and there are quizzes so it’s apparently aimed at getting the school-age crowd to buy homes.

Much to its credit, it does start the series off with the question of whether one should rent or buy. But of course, I have to take issue with the nonsense in the rent vs. buy comparison. They create a simple pro/con list for buying and renting. Unsurprisingly, they dig up the tired old half-truth “Money paid towards rent disappears forever” and stick it under the con column for renting. Yet under the pro column for buying is the flip side of that half-truth “Mortgage payments go towards your home’s equity” with no mention that interest also disappears forever.

“Restricting rules regarding guests, noise, pets, yard space, etc.” also appears as a con for renting, though most of that is not true (or applies equally to owners in condos or other situations with rules regarding noise, pets, etc.).

Even more strange though is this one: “Cosmetic renovations typically come out of your own pocket” as a con for renting. Huh? Whose pocket do they come out of for owners? For that matter, aside from Wayfare and I, who does renovations as a renter?

Considering the site is owned by mortgage brokers, who only make money when someone buys and takes out a mortgage, I was expecting it to be much more strongly biased towards rushing in to buy (e.g., to not even have a section on rent, and to focus more on stretching to get the maximum mortgage possible). The budgeting section didn’t stress that their calculations would give the upper end of affordability, but that was to be expected.

Interestingly, they have another rent vs buy table on their site. I’m not sure how I stumbled on it, but it’s not part of the cartoony first time buyer’s guide. It also looks to perhaps be a rough draft, since they get away with saying things like “Affordable: in some cities renting is the only option for people because of high housing prices; Low Risk: If house prices start to drop (as some people are predicting), you’ll be glad you didn’t buy” under renting pros, it’s not as nicely formatted, and has the common loose/lose mistake.

As I mentioned earlier, I received a Kobo Touch e-reader as a graduation present. My dad has a Kindle, and he finally remembered to bring it with him when I saw him on the weekend so I could get a bit of a comparison. Here’s my review:

Screen: pretty much the same for both units. For those unfamiliar with e-readers and digital ink, it’s a passive, reflective technology: much like regular ink, it’s a little more comfortable to read than an LCD, and has a wide (perfect?) viewing angle. The 6″ screen is a decent size: easy to tuck away in a backpack, a good amount of reading area without finding that your eyes are tending to over-scan. The “white” of the digital ink is still a little on the grey side. I find that leads to a really nice, comfortable amount of contrast for extended reading; Wayfare finds her preferences tend to higher contrast, and so she finds it a little too dark for her tastes. The print is quite sharp; I don’t know what precisely the resolution of the digital ink is, but it’s high enough that it looks as good as actual printing, and can display both serif text and images nicely. Sometimes when you turn the page, there are some residual artifacts from the previous page, the ghost images of previous letters. These are cleaned up by having the reader flash a full black page, and that is set to happen every couple of page turns. At first I found the flashing a touch distracting, but quickly got used to it (plus it only happens when the page turns, not when you’re just trying to read a page).

Turning pages: with the touch you can either tap the screen on the right-hand third of the screen to turn the page, or gesture anywhere with a right-to-left swipe of a finger. I find that sometimes my taps aren’t registered, but mostly the swipes are. That’s handy too if I’m holding the reader from the left side and just want to reach out a finger and swipe one-handed. I think that buttons (like on the Kindle and previous-gen Kobo) might be more consistently responsive, but it is awfully neat to be able to touch anywhere and turn pages, rather than having to hold the reader a certain way to get to the buttons comfortably. Plus without the need for buttons, the screen takes up more of the area on the device. I’m also really impressed at how the screen doesn’t show finger-prints. I thought a touch-screen would quickly drive me mad (I can’t even bear to look at an iPad for fear of the maddening portal to hell that device represents).

Battery: I’ve been able to read one of George R.R. Martin’s tomes per charge so far, plus a bit of playing around with it for playing around’s sake. Each Kobo page is smaller than the page in a trade paper-back, so that’s about 3000 page turns. The Chapters page suggests that up to 20,000 page turns may be possible. That may improve if there’s any break-in to the battery, but either way it’s good enough that I can take it away and read for a few days before having to worry about charging it. The battery charges by micro-USB, which is handy for travelling because I just need to pack my laptop and a tiny USB cable, rather than an A/C adaptor. If you don’t normally travel with a computer though, an A/C adaptor is not sold with it, so you’ll probably have to pay extra for that. My one complaint is that there’s only a very rough battery meter on the home page of the device, and none at all while reading. There’s also no low battery warning at all: you’ll just be reading then all of a sudden try to turn the page and get the “please plug your device in to recharge” screen. A warning a few dozen page-turns ahead of time would be really nice (though once connected to power you can continue to read).

Getting books: both the Kobo and the Kindle have the ability to get content either via your computer and a USB connection, or directly to the device via WiFi. The Kindle also has the ability to connect via the cell phone networks if you don’t have WiFi [some models only]. For browsing with the device, the hardware keyboard of the Kindle may be more useful; I haven’t and don’t see myself ever purchasing books that way (but as a counterpoint, my dad prefers, even if slower, to buy books directly on his kindle so he doesn’t have to try to make two devices talk to each other). For books outside of the Kobo/Amazon market (e.g., when I was loading drafts of my own book onto the Kobo) it’s easy to put files on: the Kobo shows up just like any other removable USB drive, and you just drag-n-drop the file onto it.

Other neat features: Both Kobo and Kindle have apps for other devices (e.g.: blackberry, ipad, iphone, PC), and will sync up your books between these devices. That could be handy if I unexpectedly find I’ve got some time to read a few pages on my blackberry, and can pick up a book where I last left off on the reader. Unfortunately, this only seems to work for titles purchased through the Kobo store (and I hear that Amazon has much the same functionality with the Kindle app), so I can’t sync up my library-borrowed, free, or 3rd-party books. And speaking of library-borrowed, that was one of the big differentiators for me: both the Toronto and London public libraries provide ebooks, but they’re not available for the Kindle (just the Kobo and a few other readers). A web browser is also included, but is still beta for the Kobo (I haven’t tried the one on the Kindle). One big complaint is the keyboard: there’s no reason for numbers and periods to be on a different view than the QWERTY keyboard, especially for entering web addresses.

E-readers vs books: it’s hard to fully replace a book, but I have to say my Kobo comes closer than I ever thought it would. It’s a touch heavier than a light paperback, so if I were to sit down and read something in paperback form it might be a toss-up as to which format I would prefer. But it’s lighter than a larger trade paperback, and certainly easier to hold than a hardcover. It was a slam-dunk for the giant Song of Ice and Fire books, which were straining my wrist in physical form. Reading from the screen itself is pretty close to reading from paper, with the option to change the font size if I so desire. Images display pretty well, but one weird thing is that PDFs can be zoomed in on and rotated, but not EPUBs. In bright sunlight, I’d choose paper: the screen is matte, but still gets some annoying reflections from strong light sources at certain angles. Another advantage to old-fashioned books is the ability to flip ahead quickly to see when the next chapter break is. But with an e-reader, if I want to read while sitting at a table hands-free (e.g.: while eating), I don’t need to play the dance of getting something heavy to prop open the book, and then move that to turn a page, etc… For travelling on vacation, I think the e-reader is also a slam-dunk (except for possibly beach reading, which I still have to test out due to the reflection issue) since it’s so light and can carry hundreds of books in its memory, and thousands more on my harddrive. Storage is another big plus: my bookshelves are already full, and I’ve been good about going to the library less because I want to save money than because I just can’t store any more books. I’m sure the technology is going to continue to mature and in a few years we’ll have e-readers that will put these to shame, but I think it has now come to the point where it’s ready for the main-stream. Plus at ~$140 it’s not a huge investment, and may even break-even since some electronic titles are cheaper than their physical brethren.

Kobo vs Kindle: there isn’t a huge amount of difference, but I’d lean towards the Kobo. It’s a bit lighter and smaller, though with the same screen size — so less casing, helped by the lack of keyboard. If you foresee any need to actually type on the thing (like if you don’t own a computer and would need to buy books directly on the device) then the Kindle may be a better choice, since the touchscreen keyboard was painful. Yet aside from just playing with it, I’ve had zero need for a keyboard; so I figure, why waste the space on the device with one? Being able to download library books is a pretty big perk in my mind (even though I haven’t actually done that yet). Plus, I’m creeped out by the 1984 incident with Amazon.

Links out for those interested in purchasing: Kobo @ Chapters, Kindle @ Amazon [the latter a referral link].

I’ve been productive with my long weekends: I wrote a book! It’s a book aimed at beginner investors, and recommends a passive indexing strategy. The main strengths of the book are:

• It’s a short book.
• It covers the basics in plain language.
• It’s written by a Canadian for Canadians.
• It has pictures of bunnies.
• It has step-by-step instructions for how to apply the basics of index investing to actually get starting investing, including how to set up an account and how to place a trade, with some key screenshots to help.

Though it’s only been about two months from when I first started to now, IMHO, the book is done. The formatting is there, the text has been revised a few times, and I even sacrificed a counterfeit $10 bill Tim Horton’s passed to me to mock up a cover image. If you’d like to review the book (preferably to post on your blog and the Amazon/Indigo reviews when available) please send me an email at holypotato@gmail.com and I’ll send you a copy. I have two formats at the moment: regular letter-sized (best for reading on a computer or to print in hard-copy at home) and Kobo/Kindle formatted PDF (not quite as smooth as an epub or Kindle native format, but looks really sweet on my Kobo), both as DRM-free PDFs.

Most of the material is not exactly unique to me or new for an investing book: basic stuff about why saving/investing is important, what’s a stock/bond/fund, what’s an RRSP/TFSA, etc. What is unique is that it’s written by me, and that it includes the kind of hands-on material that I’ve never seen anywhere else that’s needed to actually get started on your own (how to open an account, how to enter a trade, where to go to find CC’s rebalancing spreadsheet), and just inside, written in large, friendly letters are the words “Don’t Panic.” (Though in contrast to the HHGTTG, the words are not all-caps.) It is, as I mentioned, short: just 37 letter-size pages once you discount the pictures and things like the title page and ToC; in kobo format, just 89 screen refreshes including all the filler.

If you’d like to buy a copy right now (just $5) before I sort out publishing, again just send me an email at holypotato@gmail.com and I’ll sort out PayPal with you and email you both PDF form factors.

So I have just a few main questions that maybe you all can help me answer (whether you feel like reviewing the book or not):

1. Do I go for a self-publishing model, or try submitting to a traditional publisher? If self-publishing, e-book only, or physical copies too? If a publisher, which one?
2. Should I publish under my “real” name, or Potato? On the one hand, I might want to offer education services alongside the book, which is really a real-name kind of thing. On the other, I have more “brand recognition” for investing discussions as Potato… though people who aren’t familiar with my writing might take it somewhat less seriously with the pseudonym, and those who do read enough to recognize Potato as being a serious force in Canadian personal finance probably don’t need a beginner’s book.
3. If I do publish under my real name, do I “out” myself in the process and use this site to promote the book, or do I just not mention the book again here and hope the connection isn’t made?

Another option (Wayfare’s sage suggestion) is to just split BbtP: do all the finance stuff on a new blog with my “real” name, and keep all the video game/political ranting/science/random stuff here.